India’s GDP growth accelerated to 6.2% in Q3 FY25, from 5.6% in the previous quarter, driven by strong rural consumption and increased government spending. However, this is lower than the 9.5% growth recorded in the same quarter last year, raising concerns over economic momentum.
India’s GDP Growth: A Closer Look
The latest data shows that India’s economic expansion remains resilient despite global trade uncertainties. The Reserve Bank of India (RBI) had forecast a growth rate of 6.8%, while market analysts had expected 6.3% growth. The actual growth rate of 6.2% is largely in line with these forecasts, but still lags behind last year’s performance.
Government spending played a key role in boosting economic activity, with investments in infrastructure increasing significantly. Private consumption grew 6.9% year-on-year (YoY), better than 5.9% in the previous quarter, indicating a revival in both urban and rural demand.
Economic Sector Performance in Q3 FY25
The third quarter saw mixed trends across sectors:
- Agriculture: Growth rate rose to 5.6%, down from 1.5% a year ago.
- Manufacturing: Expansion rate declined to 3.5%, down from 14% last year.
- Construction: Growth rate stood at 7%, down from 10% last year.
- Industrial production: Grew by 4.5%, down from 11.8% last year.
- Services sector: Grew by 7.4%, slightly lower than the 8.3% growth seen earlier.
- Trade and hospitality: Growth rate declined to 6.7%, down from 8% in the same period last year.
Government expenditure and fiscal strategy
To support economic momentum, the Indian government stepped up investments in infrastructure, spending Rs 2.7 lakh crore on roads, highways and ports during the quarter. By the end of December, 61.7% of budgeted capital expenditure had been utilised, up significantly from the 37.7% recorded till September.
Additionally, the latest Union Budget offered tax cuts worth Rs 1 lakh crore to stimulate spending and investment. These measures, along with a surge in exports and urban consumption, are expected to sustain economic growth in the coming months.
Outlook for Q4 FY25 and beyond
According to Chief Economic Adviser V. Anantha Nageswaran, to achieve the full-year GDP growth target of 6.5%, the economy needs to expand by 7.6% in Q4 FY25. This target is considered ambitious but achievable with continued policy support and global trade recovery.
Economic agencies and rating firms, including ICRA, have also forecast a 7.6% growth in Q4FY25, citing improved consumer sentiment and public capital spending. However, uncertainties such as potential trade risks from US tariffs and fluctuations in global demand pose challenges.
India’s GDP growth in global context
Despite the slowdown over the past year, India remains the fastest-growing major economy. However, to achieve Prime Minister Narendra Modi’s vision of making India a developed nation by 2047, the economy will have to maintain a sustained annual growth rate of 7.8% or more, as recommended by the World Bank.
The RBI recently lowered its GDP growth forecast for 2024-25 to 6.6% from 7.2%, highlighting challenges such as global economic headwinds and inflationary pressures. A gradual interest rate reduction cycle is also expected, with a possible reduction of 25-50 basis points in 2025.
Conclusion
India’s Q3 FY25 GDP growth stood at 6.2%, reflecting a resilient economy supported by government spending and improving consumption trends. While the near-term outlook remains positive, sustaining long-term growth will require sustained reforms, investments, and global economic stability. Policymakers should focus on increasing industrial production, boosting exports and strengthening infrastructure to ensure stable economic progress.
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